How Can I Fix My Credit Quickly?

Right now Buyers are out looking for house more so than I have seen in recent years. This is a good sign for the Housing Market, but unfortunately many of those Buyers are not in a position to purchase, because their credit. When I break this news to them, they always ask, How Can I Improve My Credit? Answering that question is easy, what is not so easy is what immediately follows that initial question, How Can I Fix My Credit Quickly?

Almost all these Borrowers have a sense of urgency, because in many cases they have been out looking at houses, without first talking to a Loan Originator, or a Realtor who will guide them to a Loan Originator. So when I tell them that their Credit Scores are not high enough to meet the Guidelines for the Mortgage Programs that are around today, they only want to know one thing, How Can I Fix My Credit Quickly? They have found a house that they have fallen in love with, and want to purchase it right now.

Some times even though the Credit Scores are low we can get them up within 30 days if the Borrower just does a few minor things. But most of the time the fix is not one that can be done that quickly. Even though there might not be a quick fix for real low Credit Scores, determining what needs to be done to fix them is pretty simple. There is nothing magical about Credit Scores, you do not have to be a rocket scientist to figure out what needs to be done once you know what makes Credit Scores go up or down.

The Three Components That Have The Biggest Impact On Credit Score Are: Credit History, Years of Credit, and Available Credit. The first two are time related, therefore, it will take time for them to have an impact on the Credit Score. The third however, can produce very quick and substantial results if the Borrower has the funds to do what needs to be done.

Credit History: Represents 35% of a Credit Score, and it is the history of how well you have paid your bills during the time you have had credit. However, late payments, charge offs, or collections that are on the credit report, but have not reported for two years or more, very little impact on a credit score. In fact it is better to not pay off these collections, because that could actually bring down the credit score. That is because it will bring the last reporting date current again, and will now be reported as a current late once again. That is a double edge sword, because most of the time you will need to payoff collections regardless how old they are in order to qualify for most of the Loan Programs today. Late payments can lower your Credit Score quickly, but it takes much longer to bring credit scores back up by just simply paying your debts on time.

Years of Credit: Also know as length of credit. This simply what it says. It is the number of years that you have had credit, the longer the number of years with good credit the higher the score. This represents 12% of a Credit Score.

The third major component as I stated above, is the one that can quickly raise or lower Credit Scores. Therefore, it is the best and quickest way for a Borrower to quickly increase their Credit Scores if they have the funds to do what they need to do.

Available Credit: Rrepresents 30% of a Credit Score. Available Credit is the amount of credit that is available to a Borrower presently. In other words how much of the credit limit on the cards is still available. If the balance on a credit card is over 30% of the available credit limit on the card, it will have a negative impact on the credit score. And if the Borrower has gone over the Credit Card Limit, it will have an even bigger negative impact on their credit.

So the answer to both "How Can I Improfe My Credit?" and "How can I Fix My Credit Quickly?" Is to pay down the balance on credit cards to less than 30% of the Credit Card Limit. It is that simple if the Borrower has the necessary funds to do that. Depending on the number of credit cards, and how close they were to maxing out the credit card limits, will determine if it is a quick fix or not.

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

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Agreed that this can be a good way to gain necessary points to establish qualification or to improve the middle FICO score of the loan, thus potentially improving the rate and terms to the borrower. But as we all know, borrowers should consult a mortgage professional early in the process and get a grip on what they potentially stand to gain BEFORE attempting to "fix" their own credit. On FHA loans, for example, you would do this if you needed to improve the debt ratio, but you would not do this just to improve the score. Those programs tend to be more "one size fits all" as far as rates go. So if you qualify with a 680 FICO, your rate would be the same as if you had a 780, and paydown of this debt would only reduce the funds you'd have available for the close.

George, excellent blog. When we have potential clients who say their credit is not good, we send them to a loan officer at a mortgage company who is good with credit repair and follows up with those clients.

George, it can take one mistake to get a credit score to turn or years of abuse and poor financial responsibility. The time to ask about that, however is before they start the search not when they have found their dream home

This is really good information for those that need to raise their credit scores George. I have found though, those that are in a credit crunch take a bit longer to get that score up. My advice, just as yours, find a Realtor and Lender FIRST, work on credit then do the house hunting. This way you don't feel you have found and lost the home of your dreams.

George, I like what you're saying here. Get the credit fixed BEFORE looking at houses. Question: How about writing something about rebuilding credit the quickest way possible after a foreclosure, bankruptcy or short sale. I know a few people that would really be intersted in that!

Michelle you are welcome and I hope that the information is useful for you

Joe, it would be nice if we could wave a magic wand and correct every credit situation quickly, but each one is different and no guarantees. Hope the rapid re-score gets you the scores that you and your Borrower are hoping for.

Gita, thank you

Frank if they have a couple of credit cards that are maxed out, and we need 20 to 40 points some times we can get that in 30 days. But the reality is in many cases it isn't the credit cards, it is a long list of collections which usually take a lot longer and a lot more money to fix.

Richie errors do happen on credit reports, but most of the time everything on the credit report is correct, and show the reality of their financial situation.

Myrl, you are right, it may be flawed at times, but it is what we have.

Nina, with collection companies that may be the case, because the are slow to report. But with other creditors if it is corrected before the last & first weeks of the month it can usually show up on the credit report in 30 days. The reason for the last and first weeks of the month is because that is when most Creditors report to the three major Credit Bureaus

Ed and Tracy thank you

Michael, some times it can be down quickly, but each one tends to be different.

I worked with several clients to improve their credit scores. Fortunately, they were able to improve their credit within 3-6 months.. and they went on to purchase a property! It is really a great accomplishment for them, and they take great pride in owning a home.

Rod, you are right, but unfortunately there are many to go out there and try to do it on their own, and find out that they either paid off the wrong things, or paid off more than they needed to. Those also tend to be the ones that go out looking at houses before they know what they can qualify for. Seems to be a trend there :)

Sondra, that is the ideal thing to do, but many don't and that cause problems many times.

Pat and Steve the Realtors that I partner with do the same thing. Some times I can help them quickly and other times we have to look at the credit a few times before we get it to where it needs to be. It also depends on how serious the Borrower is about fixing their credit.

Richard thank you

Ed you are absolutely right, but the reality is that many go out and start to look at Open Houses, before they have a clue of what they can or cannot qualify for, and that is when the disappointments start to happen.

Pamela, yes some does take much longer than others, that is why it is important to do it sooner than later.

Brenda, that is the proper advice, and many do that, but then there are others that think they know everything and find out they don't.

Eric, I will think about that. I am always looking for ideas for blogs and I will give some thought about putting together a blog on that.

Joan, I had someone recently that I worked with for two years to fix their credit. They had a lot of stuff to fix, but they listened and now they are able to shop for a house. It feels good when that happens.

Joni yes it is a question that continues to affect many people, and one that we need to be prepared to address.

Perhaps a follow-up blog George would be how someone goes about fixing or improving their credit. Some had credit that is so badly damaged that they may need help from a third party that you may also recommend.

Richard, once I look at a Credit Report it is usually pretty obvious what needs to be done no matter how bad the credit is. It comes down many time to whether they have the available funds to fix it. The only other thing that they can do is go to a credit repair company, but I do not recommend that because a lot of times they with hold payment to creditors to try to get some leverage in negotiating down the debt. That may save the Borrower money, but it makes their credit scores worst in the mean time.

Debbie, if they have messed it up really bad, it does take time to fix, but if all they need is 40 to 60 points they can many times get that quickly by paying down their credit cards balances to no more than 1/3 of the card limit.

Credit is the biggest concern for me as a realtor today. It is what causes the ups and downs of the marketplace and having a buyer with good credit is like having a pot of gold. I do hope thing hold up.

Many potential home buyers are only 3 to 6 months away from repairing their credit and qualifying for a home. However, time isn't the only factor. They must follow the advice of professionals to accelerate their credit repair and to avoid making simple mistakes that can cause big credit score setbacks.

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